nep-iue New Economics Papers
on Informal and Underground Economics
Issue of 2019‒11‒25
four papers chosen by
Catalina Granda Carvajal
Universidad de Antioquia

  1. The tax elasticity of formal work in African countries By Pirttilä Jukka; McKay Andy; Schimanski Caroline
  2. Digitalization to Improve Tax Compliance: Evidence from VAT e-Invoicing in Peru By Matthieu Bellon; Jillie Chang; Era Dabla-Norris; Salma Khalid; Frederico Lima; Enrique Rojas; Pilar Villena
  3. Virtual trade between different time zones, educational capital and corrupt informal sector By Prasad, Alaka Shree; Mandal, Biswajit
  4. Buenas prácticas aplicadas en países de América Latina para reducir la evasión por saldos a favor en el IVA By González Mata, Enrique; Romero, Indira; Padilla, Ramón

  1. By: Pirttilä Jukka; McKay Andy; Schimanski Caroline
    Abstract: A key policy problem in most developing countries is the size of the informal sectorÂÂ and its persistence over time. In need to increase their tax revenues, policy makers face a trade-offÂÂ between decreasing tax rates (making formalizing potentially more attractive) and alternativelyÂÂ raising tax rates (potentially slowing down the formalization of the economy if people preferÂÂ informal employment or self-employment). Evidence on formal versus informal wages and jobÂÂ characteristics in different sectors and the impact of tax changes on the extent of informality inÂÂ developing countries is, however, very limited.This paper estimates the tax responsiveness of theÂÂ extensive margin of formality, that is the propensity to be a formal rather than informal worker,ÂÂ for four sub-Saharan African countries. Using repeated cross-sections of household data andÂÂ applying grouping estimator techniques, this paper does not find robust effects of taxes on theÂÂ extent of formal work, although in a pooled sample taxes appear to lower the share of formalÂÂ workers in some specifications.
    Keywords: Labour supply,Sub-Saharan Africa,Taxation,Developing countries,Informality
    Date: 2019
  2. By: Matthieu Bellon; Jillie Chang; Era Dabla-Norris; Salma Khalid; Frederico Lima; Enrique Rojas; Pilar Villena
    Abstract: This paper examines the impact of e-invoicing on firm tax compliance and performance using administrative tax data and quasi-experimental variation in the rollout of VAT electronic invoicing in Peru. We find that e-invoicing increases reported firm sales, purchases and value-added by over 5 percent in the first year after adoption. The impact is concentrated among smaller firms and sectors with higher rates of non-compliance, suggesting that e-invoicing enhances compliance by lowering compliance costs and strengthening deterrence. The reform’s positive effects on tax collection are hindered by shortcomings in the VAT refund mechanism in Peru, suggesting that digital tools such as e-invoicing should be complemented by other reforms to improve revenue mobilization.
    Date: 2019–11–01
  3. By: Prasad, Alaka Shree; Mandal, Biswajit
    Abstract: With the help of a stylized economy resembling the features of a developing country endowed with huge supply of unskilled labor, informality, informality related corruption and limited supply of educational capital we examine how virtual trade with a country located in a geographically different time zone affects the factor prices and subsequently output of different sectors. We show that skilled labors and educational capital owners are the beneficiaries of virtual trade. The service sector expands and the formal and informal good producing sectors contract along with the number of people engaged in corruption related intermediation. Following this, we also check the effect of a fall in the extent of cost of corruption. Results show an increase in unskilled wage and outflow of educational capital thus hurting the skill intensive sector. We proceed further to club the effects of both virtual trade and fall in cost of corruption and explore the consequences. Interestingly, both skilled and unskilled labors benefit. The effect on output and intermediators, however, is ambiguous.
    Keywords: Time Zones; Virtual Trade; Service; Educational Capital; Informality; Corruption; Extortion.
    JEL: D73 E26 F16 F2 L86 O17
    Date: 2019
  4. By: González Mata, Enrique; Romero, Indira; Padilla, Ramón
    Abstract: En este documento se identifican y analizan 12 medidas aplicadas en países de América Latina y el Caribe que han permitido detectar, controlar y contrarrestar la evasión fiscal por los saldos a favor en el impuesto al valor agregado (IVA). Además de revisar los resultados de algunos estudios puntuales sobre la efectividad de las prácticas, para esta investigación se consideró el análisis de expertos en esta temática, de varios países de la región, quienes fueron entrevistados. Las 12 medidas son consideradas buenas prácticas por los resultados favorables obtenidos en los países en las que fueron implementadas. Si bien se reconoce que su funcionamiento se enmarca dentro de contextos nacionales particulares, se estima que existen las condiciones adecuadas para su implementación satisfactoria en otros países de la región. Algunas de las medidas revisadas han sido puestas en marcha directamente con el objetivo de reducir los niveles de evasión en el IVA, sin embargo se detectan otras que se diseñaron con una finalidad distinta y el presente análisis da cuenta de su alcance significativo en la reducción de la evasión.
    Date: 2019–11–20

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